AMD cracks down on Global Foundries

It seems that the close relationship between AMD and its off-shoot Global Foundries has changed with things getting down to something resembling a proper business agreement.

It looks like Global Foundries had been given the lee-way of being paid by AMD even if the chips it made didn't work. Now the pair have changed the agreement covering chips made on 32 nanometer and included in the agreement was the somewhat reasonable demand that AMD only pay for chips that go.

The revision is intended to give Global Foundries an incentive to improve production of 32-nanometer chips this year. Under their previous deal, AMD paid for all chips produced at cost of production plus a markup for Global Foundries.

AMD estimates it will pay Global Foundries $1.1 billion to $1.5 billion in 2011 and $1.5 billion to $1.9 billion in 2012 for outsourced manufacturing. That compares with about $1.2 billion in 2010. AMD is also the biggest customer of Global Foundries, which Abu Dhabi created out of manufacturing operations it bought from AMD and Singapore’s Chartered Semiconductor Manufacturing Ltd. in 2009.

The new agreement increases AMD’s commitment to having new processors with built-in graphics capabilities manufactured by Global Foundries, the statement said. AMD currently uses Taiwan Semiconductor Manufacturing to make some of its graphics products.